Q-FORMATION AND JURISDICTION OF DRT

Role of the DRT

The DRTs main object and role was to recover all outstanding loans due to banks and financial
institutions. The Tribunals power is limited to try and settle cases for recovery of loans and
amounts from NPAs as classified by the banks under the RBI guidelines. The Tribunal had all the
power of a district Court and tried all pending cases with the District court under the Act which
constituted it, viz the Recovery of Debts Due to Banks & Financial Institutions Act, 1993
(RDDB&FI The Tribunal followed the same procedure of issuing summons, summoning of
witnesses, Evidence leading and Argument before final Judgment. The Tribunal also has a
Recovery officer who helps in executing the recovery Certificates as passed by the Presiding
Officers.
Thus the DRT followed the efficient legal procedure emphasizing speedy disposal of the cases and
fast implementation of the final order.
This procedure of fast trial for recovery by the DRT was much appreciated vis a vis the scene prior
to 1994, where Debt Recovery involved filing a legal suit in the civil court where the banks stated
the particulars of the case and then the court directed the borrower to pay the money to the banks.
If the loan was unsecured the bank sought to liquidate the firm assets and distribute the proceeds
from the liquidation among all the creditors, depending on the priority of the claim. On the
contrary, if loan was secured the court would enforce its security interest by allowing the sale of
collateral, so that the bank recovered their dues. But going by the way the civil procedures
progressed it would take years for a bank to recover their dues. With the establishment of DRT the
procedure for recovery of dues was faster as compared to the Civil Court. But later this was
hampered because many borrowers started cross litigating that their claims were pending at Civil
courts and that all recovery should be stalled.
In addition, the biggest challenge faced was a conflict of jurisdiction among the Official
Liquidators appointed by the High Courts and the Recovery Officers of the Debts Recovery
Tribunals. The Official Liquidator, being an officer of a higher rank, took into possession all the
properties, which actually belonged to secured creditors already before the Debts Recovery
Tribunal, thereby resulting in a deadlock, which on some occasions still remains to be resolved.

Section 17 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 [RDB Act]
provides that the DRT shall have jurisdiction to entertain and decide applications from banks and
financial institutions for recovery of debts due to such banks and financial institutions.
Debt is defined in s. 2(g) as any liability which is claimed as due by a bank during the course of
business activity. Thus, the jurisdiction of the DRT extends not just to debts as traditionally
understood, but to any claim of money that a bank makes during the course of business.

S. 18 provides that no court except the Supreme Court and the High Court under Art. 226 shall
have any jurisdiction in relation to these matters.
The question is whether borrowers must choose this remedy or whether they are also entitled to
file an independent suit in the appropriate civil court. There are two conflicting Supreme Court
decisions on this point, and two others which are ambiguous.
3. Establishment of Tribunal
.(1) The Central Government shall,
by notification, establish one or more Tribunals, to be known as the Debts
Recovery Tribunal, to exercise the jurisdiction, powers and authority
conferred on such Tribunal by or under this Act.
(2) The Central Government shall also specify, in the notification
referred to in sub-section (1), the areas within which the Tribunal may
exercise jurisdiction for entertaining and deciding the applications

4. Composition of Tribunal.(1) A Tribunal shall consist of one

person only (hereinafter referred to as the Presiding Officer) to be appointed
by notification, by the Central Government.
(2) Notwithstanding anything contained in sub-section (1), the Central
Government may authorise the Presiding Officer of one Tribunal to
discharge also the functions of the Presiding Officer of another Tribunal.
5. Qualifications for appointment as Presiding Officer.A person
shall not be qualified for appointment as the Presiding Officer of a Tribunal
unless he is, or has been, or is qualified to be, a District Judge.
6. Term of Office.The Presiding Officer of a Tribunal shall hold
office for a term of five years from the date on which he enters upon his
office or until he attains the age of 1[sixty-two years], whichever is earlier.
7. Staff of Tribunal.(1) The Central Government shall provide the
Tribunal 2[with one or more Recovery Officers] and such other officers and
employees as that Government may think fit.
(2) 3[The Recovery Officers] and other officers and employees of a
Tribunal shall discharge their functions under the general superintendence of
the Presiding Officer.
(3) The salaries and allowances and other conditions of service of the
4[Recovery Officers] and other officers and employees of a Tribunal shall be
such as may be prescribed
8. Establishment of Appellate Tribunal.(1) The Central Government
shall, by notification, establish one or more Appellate Tribunals, to be
known as the Debts Recovery Appellate Tribunal, to exercise the
jurisdiction, powers and authority conferred on such Tribunal by or under
this Act.
(2) The Central Government shall also specify in the notification,
referred to in sub-section (1) the Tribunals in relation to which the Appellate
Tribunal may exercise jurisdiction.
1[(3). Notwithstanding anything contained in sub-sections (1) and (2),
the Central Government may authorise the Chairperson of one Appellate
Tribunal to discharge also the functions of the Chairperson of other
Appellate Tribunal.]
9. Composition of Appellate Tribunal.An Appellate Tribunal
shall consist of one person only (hereinafter referred to as 2[the Chairperson
of the Appellate Tribunal] to be appointed, by notification, by the Central
Government.
10. Qualifications for appointment as 3[Chairperson of the
Appellate Tribunal].A person shall not be qualified for appointment as
4[the Chairperson of an Appellate Tribunal] unless he
(a) is, or has been, or is qualified to be, a Judge of a High Court; or
(b) has been a member of the Indian Legal Service and has held a post
in Grade I of that service for at least three years; or
(c) has held office as the Presiding Officer of a Tribunal for at least

three years.
11. Term of Office.5[The Chairperson of an Appellate Tribunal]
shall hold office for a term of five years from the date on which he enters
upon his office or until he attains the age of 6[sixty-five years], whichever is
earlier
12. Staff of the Appellate Tribunal.The provisions of section 7
(except those relating to Recovery Officer) shall, so far as may be, apply to
an Appellate Tribunal as they apply to a Tribunal and accordingly references
in that section to Tribunal shall be construed as references to Appellate
Tribunal and references to Recovery Officer shall be deemed to have
been omitted.
13. Salary and allowances and other terms and conditions of
service of Presiding Officers.The salary and allowances payable to and
the other terms and conditions of service (including pension, gratuity and
other retirement benefits) of, 1[the Presiding Officer of a Tribunal or the
Chairperson of an Appellate Tribunal] shall be such as may be prescribed:
Provided that neither the salary and allowances nor the other terms
and conditions of service of 2[the Presiding Officer of a Tribunal or the
Chairperson of an Appellate Tribunal shall be varied to his] disadvantage
after appointment.
14. Filling up of vacancies.If, for any reason other than temporary
absence, any vacancy occurs in the officer of 1[the Presiding Officer of a
Tribunal or the Chairperson of an Appellate Tribunal], then the Central
Government shall appoint another person in accordance with the provisions
of this Act to fill the vacancy and the proceedings may be continued before
the Tribunal or the Appellate Tribunal from the stage at which the vacancy is
filled.
15. Resignation and removal.(1) 1[The Presiding Officer of a
Tribunal or the Chairperson of an Appellate Tribunal] may, by notice in
writing under his hand addressed to the Central Government, resign his
office:
Provided that 3[the Presiding Officer of a Tribunal or the Chairperson
of an Appellate Tribunal] shall, unless he is permitted by the Central
Government to relinquish his office sooner, continue to hold office until the
expiry of three months from the date of receipt of such notice or until a
17. Jurisdiction, powers and authority of Tribunals.(1) A
Tribunal shall exercise, on and from the appointed day, the jurisdiction,
powers and authority to entertain and decide applications from the banks and
financial institutions for recovery of debts due to such banks and financial
institutions.
(2) An Appellate Tribunal shall exercise, on and from the appointed
day, the jurisdiction, powers and authority to entertain appeals against any
order made, or deemed to have been made, by a Tribunal under this Act.
1[17A. Power of Chairperson of Appellate Tribunal.(1) The

Chairperson of an Appellate Tribunal shall exercise general power of

superintendence and control over the Tribunals under his jurisdiction
including the power of appraising the work and recording the annual
confidential reports of Presiding Officers.
(2) The Chairperson of an Appellate Tribunal having jurisdiction over
the Tribunals may, on the application of any of the parties or on his own
motion after notice to the parties and after hearing them, transfer any case
from one Tribunal for disposal to any other Tribunal.]
18. Bar of Jurisdiction.On and from the appointed day, no court or
other authority shall have, or be entitled to exercise, any jurisdiction, powers
or authority (except the Supreme Court, and a High Court exercising
jurisdiction under articles 226 and 227 of the Constitution) in relation to the
matters specified in section 17.
In Indian Bank v. ABS Marine Products, (2006) 5 SCC 72, Indian Bank asked for a suit filed by
ABS Marine in the Calcutta High Court to be transferred to the DRT. The Supreme Court held that
such an independent suit filed by a borrower could not be transferred to the DRT without his
consent, since his right to approach a civil court cannot be taken away. This decision raised fears
that the jurisdiction of the DRT could be easily evaded by a borrower filing an independent suit in
civil court asking for the exact opposite of what the Bank was asking for in the DRT.
In SBI v. Ranjan Chemicals Ltd., (2007) 1 SCC 97, the Supreme Court held that its power to
transfer a suit did not depend on the consent of the parties. It is difficult to reconcile this decision
with ABS Marine, especially since the Court ordered the transfer of an independent suit on the
ground that it would avoid duplication of evidence, counsel, expenses etc. The concern that this
decision raised is that the DRT may be unable to handle suits which involve complex questions of
law or fact, and that the Bank could prevent a borrower from approaching a civil court to resolve
these questions by merely filing a claim in the DRT.
The DRT has summary proceedings and has traditionally been considered ill-equipped to consider
claims like misrepresentation or fraud, which require cross-examination of witnesses. Other
decisions of the Supreme Court do not clarify this matter either, for one seems to support Ranjan
Chemicals (Industrial Investment Bank of India v.Marshals Power and Telecom, (2007) 1 SCC 106)
while another seems to favour ABS Marine (Raghunath Rai Bareja v. Punjab National Bank, (2007)
2 SCC 230). Thus, the law on the point is unclear.
Delhi High Court in Cofex Exports Ltd. vs. Canara Bank [AIR 1997 Delhi 355] opined thatDebt
Recovery Tribunal is not a court but is a Tribunal having been created by a statute vested with a
special jurisdiction to try only applications by banks or financial institutions to recover any debt.
Although having regard to the provisions contained in clauses (a) to (b) of sub-section (2) of
Section 22 of the Act it had all the trappings of a court but it was held not to be a court as such. In
relation to the conflict of jurisdiction between the Civil Court and the Tribuna

Supreme Court in Nahar Industrial Enterprises Ltd. Vs. H.S.B.C. : 2009 (4) CTC 74 = (2009) 8
S.C.C. 646) held that,
a) CPC and Evidence Act have no application to the proceedings before the tribunal;
b) That the tribunal is not civil court nor is subordinate to High Court;
c) That it cannot grant any relief under sec. 34 of Specific Relief Act 1963 and that the tribunal can
issue only recovery certificate and cannot pass a decree

DRTs cannot adjudicate any claim of the bank. (Eureka fobs vs. Allahabad bank)
DRTs cannot decide any and every claim of a bank. The Banks claim must be within the meaning
of the word debt as defined in the RDB Act. If the claim does not satisfy the definition of debt,
the DRTs are denuded of their jurisdiction to hear such claims and the Banks must be advised to
approach the civil courts
When documents are challenged, DRT must seek expert evidence. (babbar bahadur vs
Allahabad bank)
Debts Recovery Tribunals must base their decision on judicious considerations only and not on
presumptions and conjectures. Where the document produced by the defendant is challenged and
denigrated as being forged, views of experts should be taken to arrive a judicious decision.
DRTs can fix rate of interest. (Punjab and sind bank vs shanti coating pvt ltd)
The Debts Recovery Tribunals ( DRT ) have the powers to fix rate of interest during the period the
case was pending before it and till the time of collection of the suit amount. In exercise of this
power it can grant a rate of interest for the period under litigation which if fair and reasonable.
Financial jurisdiction of DRT does not change with the change of amount adjudicated.(Indian
bank vs lark chemicals)
The Debts Recovery Tribunals (DRT) can hear claims of Banks only if the amount claimed is Rs. 10
lakhs and above. However the DRT will not loose jurisdiction of a case, if after adjudication the
DRT decrees for a amount lesser than Rs. 10 lakhs.
The DRT must adjudicate the claim of the applicant only.
The Debts Recovery Tribunal (DRT) must confine its decision only to the pleadings made by the
applicant. The DRT should not go into the pleadings of respondents/ defendants and adjudicate
their claim for apportioning of the sale proceeds of assets secured to the applicant.
Limitation for enforcing foreign judgments before DRTs is 3 years

The Debts Recovery Tribunals can enforce orders and judgments issued by foreign Courts for the
recovery of debts due between a Bank and its borrower in that country. On the basis of such a
judgment the DRT can issue a Recovery Certificate. However, the applicant or judgment creditor
bank has to file an application before the DRT within a period of three years from the date of
judgment. The period of limitation cannot be extended irrespective of the conduct of the parties
during the period.
Indian Evidence Act not applicable to DRTs (maya spinning ltd vs state bank of indore)
Debt Recovery Tribunals (DRTs) are meant to be fast track courts and supposed to regulate their
proceedings based on the principles of Natural Justice. They are not bound down by the rigors of
the Civil Procedure Code. This is particularly so in matters relating to cross examination of
witness and deducing evidences before the DRTs. However many defendant counsels take
recourse of demanding cross examination of witnesses as a precondition for filing their counter
affidavits which is not acceptable before the DRTs.
Co-op Banks out of DRT net (greater Bombay co op bank vs

united yarn tex pvt ltd)

Cooperative Banks are not Banks within the meaning of the DRT Act and are not governed by the
Recovery of Debts Due to Banks and Financial Institutions (RDB) Act, 1993. Banking is only
incidental to their main activity of cooperation amongst their members, and in addition, the State
cooperative acts were self contained and had provisions for speedy and efficacious remedies.
DRT cannot ask the lessee to pay more than the indenture amount.
An order of the Debts Recovery Tribunal directing Lessee to pay an higher amount than what the
lessee had agreed to pay to the lessor-debtor of the Bank is legally invalid. The lessees liability to
the Bank cannot exceed the amount agreed to in the lease agreement.
The Recovery Officer of a DRT cannot arrest a lady defaulter.
The Kerala High Court has held that the Recovery Officer of a Debt Recovery Tribunal does not
have powers to arrest and or detain a woman defaulter in a civil prison. It has held that since the
Recovery Officer has to work within the provisions of Income Tax Act, as made applicable to the
Recovery Of Debts Due to Banks and Financial Institutions Act, a woman defaulter cannot be
arrested by the Recovery Officer.
Proceedings can go on in Consumer Court as well as in DRT (bharat international vs state bank
of travankore)
Consumer Court`s have a jurisdiction independent of the Debt Recovery Tribunals. The consumer
courts are bound to hear complaints of the parties and decide the matter on merits irrespective of
the fact that the same parties were locked in a litigation before the Debt Recovery Tribunal, and the
Tribunal has already passed a decree against the complainant. The issue before the Tribunal was
different from what is before the Consumer Courts. Where there is allegation of deficiency of

services against the Banks it is the duty of the Consumer Courts to hear the complaints of the
consumer`s against without being enamored by the orders passed by the Debt Recovery Tribunals.
Merely because an order has been passed by the Debt Recovery Tribunal it does not mean that
Consumer Court cannot hear a matter within its own domain.
Consumer Court are not forums over DRTs
Consumer Courts can hear a matter between the same parties in whose case the Debt Recovery
Tribunal has already decided the claim of the Bank The issue before the Tribunal is different from
what is before the Consumer Courts. The Tribunal decides about the dues of the defaulters to the
Banks. Whereas the Consumer Courts have to decide the loss suffered by the complaint because of
negligence or deficiency of services of the Banks. However, the Consumer Court cannot take the
amount decreed by the Tribunal against the complainant as part of the loss suffered by him. This is
because, the Consumer Court is not a appellate Forum for the Debt Recovery Tribunal.
BANKING OMBUDSMAN & DRT ACT ARE DIFFERENT AND EXCLUSIVE Proceedings
between two parties based on the same facts can go on simultaneously before the two forums.
An issue based on the same facts of the case and between the same parties can go on
simultaneously before the Debt Recovery Tribunal as well as before the Banking Ombudsman.
This is because the scheme of Banking Ombudsman is totally different from that of the Debt
Recovery Act and the Tribunals constituted under it. Both of them are exclusive to one and another
and do not have any overlapping jurisdictions. Therefore, a dispute between two parties, and,
arising out of the same facts, could be pending before the Banking Ombudsman as well as the
Debt Recovery Tribunal. Proceedings can take place simultaneously in both the forums without
one coming in the way of another.
Debt Recovery Tribunal cannot pass a decree. It can issue only recovery certificates. Dataware
Design Labs. v. State Bank of India
State Bank of India v. Madhumita Construction (Pvt.) Ltd. and others
The Tribunal constituted under the DRT Act is not a Court. It is a Tribunal having the trappings of
a Court. A Tribunal with trappings of Court cannot be equated with a Court as is understood from
the expression Court. A Court is a body established by law for the administration of justice by
Judges or Magistrates.
The Patna High Court in Bihar Solex (P.) Ltd., In re [(1999) 20 Comp Cas 235 (Bihar)] on the basis
the judgment in Maharashtra Steel Tubes case held that u/s 17, 18 and 34 there cannot be any
doubt that the jurisdiction of the DRT to entertain and decide suits or other proceedings by banks
or financial institutions is exclusive, to the exclusion of all other courts except the Supreme Court
or the High Court under Art 226/227.
Conclusion

The Debts Recovery Tribunals performed well and helped the Banks and Financial Institutions
recover substantially large parts of their non performing assets and bad debts. Further, the DRTs
caused an increase in state-level bank lending, as Banks trusted that there is a mechanism in place
to recover the dues. Nevertheless, interest rates arose after the DRTs were established and all
issues for credit expansion were resolved. Although, clashes are inevitable the DRT has helped
the Banks and financial sectors recover huge amounts of loans, which earlier would take years to
recover on account of the long civil procedures. With the enactment of the SARFAESI Act, 2002
(The Securitization and Reconstruction of Financial Assets & Enforcement of Security Interest Act,
2002) it has become possible to ensure speedy recovery and instill confidence to the borrower that
they would be heard fairly especially when the borrower has got a very good track-record /
relation with the Bank apart from having valuable and marketable security pledged to the Bank.
The only possible remedy to the Banks and Fis to avoid clashes is do a complete due diligence
before advancing loans to borrowers viz. title search, residence verification etc. However, there is
no dispute to the fact that be it Public Sector or Private Sector Banking DRT is the forum for
speedy recovery of debts.